Made in America?
That Honda you just passed might be more American than your Chevy
January 22, 2019
Americans spend the majority of their earnings on two main purchases: housing and transportation. Besides buying a home, the automobile you pick out will likely be the second largest financial decision you make. For DePaul students that are nearing graduation and entering the workforce, purchasing a car is something they will have to consider in the near future.
Americans love cars. The automotive industry helped bolster the economy as well as cement the U.S. as a manufacturing powerhouse. For decades, driving American meant having pride in your country. Once a symbol of innovation and value, American cars have struggled to keep up with their foreign counterparts. During the most recent recession, the big three U.S. auto manufacturers — General Motors, Ford and Chrysler — collectively turned their pockets inside out which lead to the government paying $80.7 billion to bail out the American auto industry. With promises made and their debts repaid, what is the state of the American car in 2019? Not so easy to define.
“Which cars are American is clearly in the eyes of the beholder,” said DePaul business professor Daniel Heiser. “Brands with headquarters in the U.S. seem like logical contenders, but Toyota and Honda also score high on the percentage of domestic content.”
What does it really mean for a car to be American? Does it need to be made in America? Should the company be based in America? Should the product have a majority of American parts?
“American cars have for the most part realized that the imports aren’t really going away,” said Motor Trend writer Jonny Lieberman. “To succeed, especially globally, they need to compete on the world stage.”
This means that domestic manufacturers must consider foreign markets if they wish to thrive. This shift in target consumers comes largely from Asia, more specifically China. China has the world’s largest auto market, it usurped the title from the United States in 2016 at $28 million in sales versus $17.5 million at home.
“Living in a global economy where each manufacturer is integrating parts from different locations around the world, the concept of an ‘American Automobile’ doesn’t exist anymore,” said DePaul management and entrepreneurship professor Mona Pearl. “With globally joint R&D teams, employees spread around the world, technology, suppliers and company acquisitions from a wide range of countries, this phrase is losing its meaning and originality. We may need to undergo a mindset shift, get used to the ‘new normal’ and to the idea that products are designed and manufactured with a global distribution intent, as well as with the idea that they can be adapted to local markets.”
When General Motors ended some underperforming brands a few years back they kept Buick over Pontiac because of how well Buicks perform in China.
“Whether its U.S. companies doing business in China or European or Asian companies doing business in the United States, they like to have manufacturing in the country where they’re doing business,” said Dave Sloan, president of the Chicago Auto Trade Association.
Manufacturers that wish to build cars in China are required to work with a Chinese partner to do business. For companies like General Motors, this means massive expansions in the east and lots of revenue for the brand.
China isn’t the end-all-be-all for automakers, however. Ford opened its seventh plant in China in 2017, a near-billion-dollar investment. The company built the factory to increase Ford’s sales in China to a goal of 1.6 million units per year. Ford’s Chinese sales hit a record high of 1.27 million in 2016 but have fallen steadily ever since. Ford employees who are bound to nondisclosure agreements are still saying that the company has expanded too rapidly.
Thanks to strong results in the Chinese and North American Market, General Motors, on the other hand, saw an increase of 25 percent in pre-tax profits in the third quarter of 2018 and a net income of $2.5 billion.
Despite high sales, GM recently closed several factories in North America which cost thousands of workers their jobs. The plants to be closed include Detroit and Warren Michigan, Lordstown Ohio and Baltimore. Seven models are slated to be discontinued. General Motors is working on restructuring the company for the future. This means more money will be invested into research and development for autonomous and electric vehicles. General Motors announced that they plan to build 20 new electric vehicles between now and 2023.
Cruise, GM’s autonomous subsidiary, received a large investment from SoftBank Group. In this new autonomous sector, GM is really competing with Apple and Google rather than Ford and Chrysler.
For those of us who actually enjoy driving, we thankfully have some great options. While American automakers are shifting the majority of brand focus on crossovers and SUVs, there are a number of performance cars that can compete with the Germans, British and Italians. The Mustang, Challenger, Corvette and Camaro all are available in hot versions that up the power and driver engagement to world-class territory.
All of those performance cars were designed with global markets in mind. So what cars can we claim as fully American?
“Trucks, which are largely only consumed in the U.S., are purely American,” said Lieberman. “Gigantic, powerful — size as a substitute for luxury. That’s why you’re getting trucks that can haul 35,000 pounds.”
Pickup trucks belong to us, existing as possibly the most American expression of utility and self-assertion. With more American companies straying away from conventional passenger sedans and compact cars, trucks and SUVs are taking over. What’s interesting is that these same red-blooded trucks are helping fund the electric and autonomous future of the American automobile.
So again, what are American cars? According to Pearl, perhaps it no longer is significant.
“Why does it matter in a global economy where an automobile can be manufactured just about anywhere, with parts from a variety of locations, and with the idea to be sold locally?”
Driving American is much more nebulous today than it was in the 1960’s. If you want to own a purely American car I’d suggest a 1968 Shelby GT500.